My very good friend and COO of Compraventa in Spain (Spains largest classified site) Pablo Martin commented on my earlier post about the ad potential in youtube. He said that CPM prices in Norway have gone totally haywire and that in all other markets the average price per CPM is substantially lower. And he is right indeed.
I suggest that the rest of the online media world should follow the Norwegian online market closely in the times ahead. Why? The last three/four years we have experienced a massive growth in the spending on online media. The growth has mostly been driven by spending on display ads on the big online newspapers and portals. Unlike other markets we have spend little money on SEM/SEO og affiliate marketing (to my despair)
Spending on search is still a mere 10-14% of the total. In some areas Norway is a very sophisticated market in others we are completely lost. Even though this is an interesting discussion in itself lets not focus on that now.
So we spend money on display ads in Norway and we spend a lot. Who are the advertiser, mostly distribution players like the travel industry and other e-commerce companies. They have spent more and more money on the same ads every year as the prices have increased. The total number of user has also risen but not enough to defend the steep rise in prices. The result for the advertiser has been a weaker ROI year by year. But they still spend because they are still in positive territory.
Now it looks like we are getting closer to a tipping point. Prices and the CAC are getting so high that advertisers are starting to think twice about spending their budgets online. There is still growth but I think we might see a halt very soon. So what happens then?
We might experience a drop in media prices or at least a flattening. The other scenario is continuous growth. How can that happen? The keyword is brand advertising. When/If the big brand advertiser starts throwing more money online they might replace the distribution companies as the number one source of income. Brand advertiser has more money, they are willing to spend more money and they don’t measure ROI the same way. This “shift” in advertisers could lead to further revenue growth for online media companies. What will the distribution players do? They will spend more with google, yahoo, tradedoubler, advertising.com and others.
This is why I think that other countries should look to Norway, they might learn something about the future of their business. Or not!
Friday, May 25, 2007
Thursday, April 19, 2007
It’s all about the ads, by Even Aas-Eng
So Google buys Doubleclick, nobody should be surprised really. The price is steep but again it will pay off for Google. Let’s take a few steps back and look at why.
About a month ago Steve Balmer of Microsoft held a lecture where he described Google as a "one trick Pony". I wasn’t there but I guess he was pointing at the fact that Google only has monetized one product, search ads.
Mr Balmer is right and wrong at the same time. Approximately 94% of Google’s revenues are generated by ad sales. Looking at it like that Google doesn’t have many tricks! But what we need to look at is where the ad revenue is coming from.
Most marketing people only associate Google with text ads in search engines. But the fact is that about 46% of their ad revenue is generated through the adsense system. Don’t know what adsense is? Read up here http://en.wikipedia.org/wiki/Adsense
Adsense is "long tail" in practise. The adsense system enables Google to commercialize the long tail of web sites and that’s a pretty long tail! Google’s network of niche publishers using the adsense technology consist of several million web sites. And the real beauty of it is that it keeps on growing as the web grows. That is one of the reasons that adsense revenue has risen so sharply the past couple of years. 70 million blogs today, 140 million in one year? Imagine what that would mean for Google’s ad revenue, and they practically have no competition.
Previous Google deals with companies like Myspace and the You tube buyout has all been about one single thing, buying ad inventory. They are buying places to display their adsense ads. As mentioned in an earlier post on this blog this is a traffic sensitive business model. As long as the traffic is high Google will reap the rewards anyway. The acquisition of Doubleclick though is of a different kind.
Adsense ads has up to recently been text ads. Those days are gone and we are now seeing more and more display and video ads. Who buys those ads? Companies looking for brand awareness and companies that wants to communicate with their target audience. These companies are big and most of them use international agencies like the one I work for. Most of these companies don’t live in a "customer acquisition cost" type of world. They have parameters like demography, geography, annual income, gender, that decide where they allocate their budget. All the soft values that distribution maniacs like my self forgot years ago! My point is that the correctly targeted banner ad is not dead, it has just been reborn!
Up to now the adsense system has been limited in many ways. You can’t use third party ad-serving systems, it’s been poor on segmentation and the creative’s has been very limited indeed. This will change with a Doubleclick integration. Doubleclicks customers are the ones that Google now tries to please. It’s no longer the long tail of small and medium size companies or the web-distribution giants that Google are targeting. It’s the big FMCG companies, the automakers, the telecom giants and so on. These companies need data, they need flexibility and they make decisions based on other values than Amazon or Expedia. Doubleclick will provide just that.
So the Doubleclick acquisition will go down very well in the agency world and with the companies we all want to play with. I am sorry Microsoft and Yahoo it was another smart move from Mountain View.
About a month ago Steve Balmer of Microsoft held a lecture where he described Google as a "one trick Pony". I wasn’t there but I guess he was pointing at the fact that Google only has monetized one product, search ads.
Mr Balmer is right and wrong at the same time. Approximately 94% of Google’s revenues are generated by ad sales. Looking at it like that Google doesn’t have many tricks! But what we need to look at is where the ad revenue is coming from.
Most marketing people only associate Google with text ads in search engines. But the fact is that about 46% of their ad revenue is generated through the adsense system. Don’t know what adsense is? Read up here http://en.wikipedia.org/wiki/Adsense
Adsense is "long tail" in practise. The adsense system enables Google to commercialize the long tail of web sites and that’s a pretty long tail! Google’s network of niche publishers using the adsense technology consist of several million web sites. And the real beauty of it is that it keeps on growing as the web grows. That is one of the reasons that adsense revenue has risen so sharply the past couple of years. 70 million blogs today, 140 million in one year? Imagine what that would mean for Google’s ad revenue, and they practically have no competition.
Previous Google deals with companies like Myspace and the You tube buyout has all been about one single thing, buying ad inventory. They are buying places to display their adsense ads. As mentioned in an earlier post on this blog this is a traffic sensitive business model. As long as the traffic is high Google will reap the rewards anyway. The acquisition of Doubleclick though is of a different kind.
Adsense ads has up to recently been text ads. Those days are gone and we are now seeing more and more display and video ads. Who buys those ads? Companies looking for brand awareness and companies that wants to communicate with their target audience. These companies are big and most of them use international agencies like the one I work for. Most of these companies don’t live in a "customer acquisition cost" type of world. They have parameters like demography, geography, annual income, gender, that decide where they allocate their budget. All the soft values that distribution maniacs like my self forgot years ago! My point is that the correctly targeted banner ad is not dead, it has just been reborn!
Up to now the adsense system has been limited in many ways. You can’t use third party ad-serving systems, it’s been poor on segmentation and the creative’s has been very limited indeed. This will change with a Doubleclick integration. Doubleclicks customers are the ones that Google now tries to please. It’s no longer the long tail of small and medium size companies or the web-distribution giants that Google are targeting. It’s the big FMCG companies, the automakers, the telecom giants and so on. These companies need data, they need flexibility and they make decisions based on other values than Amazon or Expedia. Doubleclick will provide just that.
So the Doubleclick acquisition will go down very well in the agency world and with the companies we all want to play with. I am sorry Microsoft and Yahoo it was another smart move from Mountain View.
Tuesday, April 17, 2007
Google buys Doubleclick, by Even Aas-Eng
I will comment on this when I have time but if you are interested you can check out this FAQ that Google released regarding its acquisition.
http://216.239.57.110/blog_resources/DC_FAQ.pdf
http://216.239.57.110/blog_resources/DC_FAQ.pdf
Monday, April 16, 2007
Hello, My Name Is Gord, And I’ve Been Behaviorally Targeted, by Even Aas-Eng
Here is a great example of why it works and some interesting points on why we should be a bit careful. http://blogs.mediapost.com/search_insider/?p=507
Wednesday, April 11, 2007
What’s new? Demographic targeting. By Even Aas-Eng
MSN has for a while offered the option of buying demographic targeted ads. The segmentation is based on passport logins and windows live id. With the introduction of adcenter, Microsoft’s ad words competitor, demographic targeting has reached the search arena as well. And apparently with good results. According to searchenginewatch several clients has experienced a drastic decrease in cost per action using the new tool. And its good news for Microsoft, this is probably the first innovation within search that they launch before Google or yahoo.
So while Microsoft launches demographic search, Google goes the other way and launches demographic banner advertisement in their site targeting network. A interesting move that should suite the agency world well. The data used to perform the segmentation comes from comscore who has gathered demographic information about sites taking part in Google’s site targeting program. So offline segmentation goes online, why did it take so long?
You can read more about demo-targeting in adcenter here:
http://advertising.microsoft.com/demographic-targeting-report
And Google demo-targeting here:
https://adwords.google.com/support/bin/answer.py?answer=33743
So while Microsoft launches demographic search, Google goes the other way and launches demographic banner advertisement in their site targeting network. A interesting move that should suite the agency world well. The data used to perform the segmentation comes from comscore who has gathered demographic information about sites taking part in Google’s site targeting program. So offline segmentation goes online, why did it take so long?
You can read more about demo-targeting in adcenter here:
http://advertising.microsoft.com/demographic-targeting-report
And Google demo-targeting here:
https://adwords.google.com/support/bin/answer.py?answer=33743
Monday, March 12, 2007
Why Google didn’t pay too much for Youtube. By Even Aas-Eng
Ever since the Google takeover last fall there has been a lot of talk about how you tube will make money and if Google bought the hype and nothing more. Almost all debates have centered around video ads and how to create a sustainable business model without interrupting the fragile feelings of the you tube community!
And yes, there are a lot of uncertainties and a lot of trouble with regards to copyright issues and how to monetize video ads, so lets just forget all that for a moment and look at some figures instead.
According to Google, you tube had 133 million users in February. According to Alexa a you tube user sees 12 pages on an average visit. That means that you tube has around 1,6 billion page views every month. That again means around 19 billion page views in a year. You tube are experiencing a substantial growth so lets assume that the yearly number of page views are 15% higher than that. That gives us a total number of 22 billion page views per year.
So, can you make any money on 22 billion page views? Obviously but the question is how much.
Before the Google buy out You tube was running Google text ads through their AdSense system. Rumor has it that they made 15million$ in 2006. Keep in mind that this was before the takeover and that Google also made money on these ads. Lets assume that the split was 50/50, that would mean that the total ad revenue in 2006 was 30 million $. But still the price of 1,65 billion $ was too high right? not necessarily...
You tube today have four times the number of users compared with 2006. Since the AdSense models only parameter is volume we can safely assume that the ad income will follow the increase in users. That gives us a total ad revenue of 120 million $ in 2007. And then the picture doesn't look that hazy anymore.
Okay, lets look even further into the crystal ball. Google started some time ago to run image ads trough the AdSense system. They are sold on a CPM basis through the normal bidding process. Just like search was a bargain in the early days so is CPM advertising on you tube at the moment. But that is changing as I wright this, the market is doing its job and adjusting prices every second.
In the Norwegian market a normal CPM price is about 25 $ and on some niche sites the price is substantially higher. Now lets assume that you tube are able to sell all their page views to one advertiser at the average Norwegian price of 25 $ per CPM. That would generate 550 million $ worth of ad revenue per year. There will be some cannibalization here towards text ads but lets say the the total ad revenue potential is somewhere in the range of 700-900 million per year. Then it looks like a rather good takeover, doesn't it?
This wont happen this year and not in 2008 either but they will get there. And this is before they have solved the video ads puzzle. The only threat's I see for you tube success is competing sites. Traffic is the only road to success in this business model and that's why you tube want take any chances on loosing users by fiddling with the actual videos.
And yes, there are a lot of uncertainties and a lot of trouble with regards to copyright issues and how to monetize video ads, so lets just forget all that for a moment and look at some figures instead.
According to Google, you tube had 133 million users in February. According to Alexa a you tube user sees 12 pages on an average visit. That means that you tube has around 1,6 billion page views every month. That again means around 19 billion page views in a year. You tube are experiencing a substantial growth so lets assume that the yearly number of page views are 15% higher than that. That gives us a total number of 22 billion page views per year.
So, can you make any money on 22 billion page views? Obviously but the question is how much.
Before the Google buy out You tube was running Google text ads through their AdSense system. Rumor has it that they made 15million$ in 2006. Keep in mind that this was before the takeover and that Google also made money on these ads. Lets assume that the split was 50/50, that would mean that the total ad revenue in 2006 was 30 million $. But still the price of 1,65 billion $ was too high right? not necessarily...
You tube today have four times the number of users compared with 2006. Since the AdSense models only parameter is volume we can safely assume that the ad income will follow the increase in users. That gives us a total ad revenue of 120 million $ in 2007. And then the picture doesn't look that hazy anymore.
Okay, lets look even further into the crystal ball. Google started some time ago to run image ads trough the AdSense system. They are sold on a CPM basis through the normal bidding process. Just like search was a bargain in the early days so is CPM advertising on you tube at the moment. But that is changing as I wright this, the market is doing its job and adjusting prices every second.
In the Norwegian market a normal CPM price is about 25 $ and on some niche sites the price is substantially higher. Now lets assume that you tube are able to sell all their page views to one advertiser at the average Norwegian price of 25 $ per CPM. That would generate 550 million $ worth of ad revenue per year. There will be some cannibalization here towards text ads but lets say the the total ad revenue potential is somewhere in the range of 700-900 million per year. Then it looks like a rather good takeover, doesn't it?
This wont happen this year and not in 2008 either but they will get there. And this is before they have solved the video ads puzzle. The only threat's I see for you tube success is competing sites. Traffic is the only road to success in this business model and that's why you tube want take any chances on loosing users by fiddling with the actual videos.
Thursday, March 8, 2007
What is wrong with traditional media companies? By Even Aas-Eng
My plan is not to post personal outburst on this blog but this time I cant help myself.
On Tuesday there where champions league matches and I was watching Liverpool VS Barcelona. If you follow football you would know that a lot of action took place during the Valencia VS Inter match that was on at the same time. It wasn't football action but never the less interesting!
But I didn't see this as I was busy watching the other game. The next day I read about the fighting in the newspapers and I wanted to see the actual incident. Could I find it on any of the newspapers, NO because they don't own the rights to broadcast champions league football. That's annoying but understandable. So I went to you tube and searched for Valencia Inter but only got old matches between the two teams. Then the real quest started.
I watched the sports news at TV2 online but they didn't have any pictures because the show was sent before the game ended. I tried other newspapers in Sweden and UK, no live pictures there either. Then I went to TV3 web pages, the company that have the rights to send CL matches. What did I find there? Absolutely nothing! Well I did get a short look at what quit possible is the worst website ever made. http://www.tv3.no/index.php?option=com_content&task=view&id=9057&Itemid=954
Then I did get to see the incident at the TV2 daily news show on TV, but they only showed a short clip. The quest continued!
I tried some more news sites before I ended up at you tube again and searched for Valencia, Inter, Fighting, 2007 and found A LOT of clips of the incident.
So my point here is that five of Norway's largest media companies had their chance to provide me with what I was Looking for. I was willing to spend 10 min on their sites being exposed for all their commercials and maybe I would have been willing to pay to see their content. None of them took the chance and I ended up at you tube. Get a grip guys, you are digging your own grave.
On Tuesday there where champions league matches and I was watching Liverpool VS Barcelona. If you follow football you would know that a lot of action took place during the Valencia VS Inter match that was on at the same time. It wasn't football action but never the less interesting!
But I didn't see this as I was busy watching the other game. The next day I read about the fighting in the newspapers and I wanted to see the actual incident. Could I find it on any of the newspapers, NO because they don't own the rights to broadcast champions league football. That's annoying but understandable. So I went to you tube and searched for Valencia Inter but only got old matches between the two teams. Then the real quest started.
I watched the sports news at TV2 online but they didn't have any pictures because the show was sent before the game ended. I tried other newspapers in Sweden and UK, no live pictures there either. Then I went to TV3 web pages, the company that have the rights to send CL matches. What did I find there? Absolutely nothing! Well I did get a short look at what quit possible is the worst website ever made. http://www.tv3.no/index.php?option=com_content&task=view&id=9057&Itemid=954
Then I did get to see the incident at the TV2 daily news show on TV, but they only showed a short clip. The quest continued!
I tried some more news sites before I ended up at you tube again and searched for Valencia, Inter, Fighting, 2007 and found A LOT of clips of the incident.
So my point here is that five of Norway's largest media companies had their chance to provide me with what I was Looking for. I was willing to spend 10 min on their sites being exposed for all their commercials and maybe I would have been willing to pay to see their content. None of them took the chance and I ended up at you tube. Get a grip guys, you are digging your own grave.
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